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Economic fluctuations, shrinking demand and the rise of AI are posing new challenges to the labour market. As a result, job transfers and salary adjustments ¨C core aspects of employment ¨C have become significant issues amid increasing labour disputes. This article explains why it is crucial for employers to understand the legality of such adjustments, ensuring compliance when exercising their employment management rights.

Some scenarios

Mutual agreement on job transfer and salary adjustment. Reaching a mutual agreement is the most prudent way with lowest risks for employers. If both parties agree on the adjustment during performance of the employment contract, a supplementary written agreement or amendment agreement can redefine the job level, responsibilities and compensation for the role.

In practice, if an employee fails to raise an objection to the employer¡¯s unilateral notification of a job transfer, salary adjustment, or reduction in overtime pay and merit pay standards, mutual agreement will be deemed to have been reached on the employment contract modification once the new terms are implemented for one month.

Mutual agreement on job transfer and salary adjustment due to significant changes in objective conditions. In practice, there are varying criteria for determining such circumstances. Some courts hold that the circumstances should be limited to events of force majeure, or situations beyond the control of both parties such as company relocation, mergers and asset transfers. In these scenarios, the employer should offer the employee the same salary when adjusting their positions.

However, in some regions, it is held that the circumstances should also include organisational restructuring out of business needs, termination of the employee¡¯s programme, and management¡¯s decision to cancel the position. In these cases, the focus is more on the negotiation process rather than justification of the salary adjustment.

Lawful unilateral arrangement of job transfer and salary adjustment due to employee incompetence. When adjusting the position and salary of an employee deemed unfit for the role, the key is to substantiate his/her incompetence. Employee suitability is typically assessed by performance evaluation, for which criteria must be clearly communicated to employees in advance.

Evaluation should be based primarily on objective and quantifiable data, supplemented by qualitative analysis, while assessment data should be clear and accurate. Advisably the results are to be signed off by employees.

Lawful unilateral arrangement of job transfer and salary adjustment due to employee illness or non-work-related injury. If an employee fails to resume his/her original position after a prescribed period of medical treatment for illness and non-work-related injury, the employer may redistribute the employee to a role suited to their experience and health condition.

Before the end of the medical period, the employer should discuss details of work resumption with the employee to confirm the return date and any need for reassignment.

In the case of impaired working capacity, the employer should further notify the employee to undertake labour incapacity assessment. If the employee requests reassignment, the employer should clearly inform them of new job duties and compensation before returning to work to avoid risks of non-compliance. Should the employee fail to resume work, deny the labour incapacity assessment and refuse reassignment, the employer has the right to unilaterally terminate the employment contract.

Lawful unilateral arrangement of job transfer and salary adjustment due to need for declassification. Matters on confidentiality of trade secrets can be agreed in the employment contract between employer and an employee with access to trade secrets, such as adjustments to the position with an altered contract within a certain period (maximum six months) before the contract ends, or after the employee requests termination.

It is crucial to confirm that the employee is involved in trade secrets, and the confidentiality agreement signed by both parties allows such position changes within six months before contract termination or dissolution.

Legal arrangement of job transfer when obliged to protect special workers. Protection is obliged under two categories.

(1) Employees in pregnancy or lactation. If failing to perform her duties during pregnancy, the employer should reduce her workload or give her a more suitable role, based on the medical certificate presented.

In practice, a pregnant or lactating employee may find her original post difficult due to physical discomfort. On an employee request, the employer is obliged to adjust her position without reducing her salary.

If the employer initiates the job transfer out of business needs, prior consent shall be obtained from the employee. When the current position proves definitely unsuitable for a pregnant woman, however, the employer may unilaterally and in good faith reassign the employee, provided her salary remains unchanged.

(2) Employees with level-five or level-six work-related disabilities. An employee with disabilities due to work-related injury or occupational disease, yet retaining certain working capacity, may be reassigned to lighter duties.

In such cases, employers are allowed to adjust their salary accordingly. But unilateral reassignment is prohibited. If the employee refuses all offered positions, the employer may make no further arrangements for reassignment and instead provide a monthly disability allowance.

Justification

In summary, while an employer has discretion
to reassign an employee and adjust their salary, such reassignment must be law abiding and well justified in utmost good faith. To determine whether an adjustment is well justified, consider whether:

• It is based on the employer¡¯s operational needs;
• It constitutes a significant change in working conditions;
• It is discriminatory or insulting to the employee;
• It has a major impact on the employee¡¯s remuneration and other benefits;
• The new position matches the employee¡¯s knowledge, experience and capabilities; and
• The employer provides appropriate compensation for any adverse changes in the work location.

Additionally, to ensure compliance, employers should clearly state in the employee handbook or labour contract that positions may be adjusted based on operational needs. This can include job rotation, reassignment to avoid conflict of interest, furlough, and other reasonable adjustments for the sake of business operations.

Wu Kun is a partner and Qi Yuan is an associate at Blossom & Credit Law Firm